May 28, 2015

Unique opportunity for social enterprises in European procurement markets

The European Union is easing the way for its Member States to ‘buy social’, offering in turn social enterprises unprecedented access to a government contracts’ market representing annually EUR 425 billion or 3.4% of the EU’s GDP.

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It all started with a Green Paper published in January 2011 by the European Commission, which triggered a vast debate on ‘The Modernisation of EU Public Procurement Policy’, a domain subject to EU rules to ensure equal access to and fair competition for public contracts within the European Procurement Market. The resulting consultation process showed a desire to have social or environmental criteria in public procurement weigh more heavily in European public procurement legislation. 

This process then saw the Commission propose the revision of two major Directives in December 2011 on procurement in the water, energy, transport and postal services sectors and on public works, supply and service contracts, as well as the adoption of a directive on concession contracts. After a lengthy co-decision procedure, the directives were voted by the European Parliament in January 2014 and adopted by the Council in February 2014. Member States now have until April 2016 to transpose the new rules into their national law (except with regard to e-procurement, where the deadline is September 2018).

‘Buy social’

While making current rules simpler and more flexible, this reform also offers unprecedented opportunities for Member States to ‘buy social’, making it easier for social enterprises to access a market representing annually EUR 425 billion or 3.4% of the EU’s GDP (2011 figures).

A key measure for social enterprises, public contracts can now be reserved for sheltered employment undertakings whose objective is to bring into the labour force disabled or otherwise disadvantaged persons (such as the long-term unemployed or members of disadvantaged minorities), where this category of employee makes up more than 30% of the staff. Similarly, contracts of a maximum duration of 3 years for certain health, social and cultural services can be reserved for non-profit undertakings pursuing a public service mission and organised on the basis of participation.

Awarding authorities will now be allowed to evaluate bids on the basis of broader parameters, such as the total lifecycle cost (including the carbon footprint) of goods or services bought. For instance, a local authority wishing to purchase a school bus could favour buses which, even though they are more expensive initially, consume less fuel, require less maintenance and have a longer life span. The production process for goods and services purchased, e.g. the employment of disadvantaged people or the use of environmentally-friendly materials, could also be a determining factor in the choice of contractor. In that context, a local authority could favour a firm which employs more long-term unemployed people for a public buildings maintenance contract.

Focus on quality

“The new European rules on public procurement will ensure that public money is used more effectively and transparently whilst helping public authorities when they purchase goods or services or undertake works. In this context, favouring the bid offering best value for money rather than merely the cheapest, making it easier for companies, in particular SMEs, to bid for public contracts and reinforcing the mechanisms for protecting social and labour rights, will represent a huge step forward towards high quality public procurement which respects social needs”

The public procurement reform also allows for a greater focus on the quality of social services such as health or education, giving the possibility of awarding the contract to firms best meeting qualitative criteria such as accessibility, continuity or the needs of the end user. Thus, there is more scope created for Member States to do away with the cost-only criteria for the award of contracts. Moreover, any abnormally low bid will be rejected if it indicates a failure to observe social, labour law or environmental protection obligation

The possibilities offered by the European reform of public procurement markets are a great starting point for social enterprises to get better access to public contracts, but it remains to be seen if Member States ensure the creation of such opportunities when they transpose the criteria into their legal corpus…

Marc Tarabella, MEP, Rapporteur on the Reform

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